Impact of Budget 2014-15 on Startup Companies

The finance minister P. Chidambaram notified a Public Procurement Policy for SMEs. According to the notification, all Central Public Sector Undertakings (CPSUs) have to procure 20% of their total purchase from SMEs. This amounts to INR75,000 cr worth of goods to be procured from CPSUs. This is a great boon for startup companies, as all technological products (hardware, software) are notified in the policy.

The Government wants all departments of the Center to be transparent and modernized. To this end, it approved the modernization of Information Technology of the whole Postal Department. Efforts will continue to modernize other departments.

India has approved the setting up of semiconductor wafer plants, commonly known as FAB units, costing a total of INR63,410 crores. This move has been made to cut long-term import bills, as demand for electronics goods in India is expected to be $200 bn in the year 2020. These FABs will have a big impact on the development of an Electronics System Design and Manufacturing eco-system across the country. This will help erect a critical pillar required to promote Electronics System Design and Manufacturing in India. The Semiconductor Wafer Fabrication units when set up, will stimulate the flow of capital and technology, create employment opportunities, help addition of higher-value electronic products to those manufactured in India, reduce dependence on imports, and lead to innovation.

This year’s budget presented ‘India Inclusive Innovation Fund’, to promote grassroots innovations with social returns to support enterprises in the MSME sector, with an initial contribution of INR100 crore to the corpus of the fund. This fund will be managed by the Ministry of MSME and is headed by Sam Pitroda(Adviser to the Prime Minister on Public Information Infrastructure & Innovations). The fund will invest in:
a. Healthcare
b. Food and Nutrition
c. Agriculture
d. Education
e. Energy
f. Financial Inclusion
g. Environment
h. Technology
as enablers. The fund will invest in companies which provide solutions to the Bottom of Pyramid (BOP) people and it is looking at an investment IRR of 12%. The fund has a life of 11 years, including extensions, and the corpus can grow to up to INR5,000 cr, from the current size of INR100 cr.

In this budget, the Government also dedicated a Venture Capital Fund to providing concessional finance to Scheduled Castes, which will be set up by IFCI with an initial capital of INR200 crore, which can be supplemented every year.

Eight National Investment and Manufacturing Zones (NIMZ) have been announced along the Delhi-Mumbai Industrial Corridor and nine projects have been approved by the DMIC Trust. Five NIMZs outside the DMIC have also been given in-principle approval. Three more corridors connecting Chennai and Bengaluru, Bengaluru and Mumbai, and Amritsar and Kolkata are under different stages of preparatory work.

About the author

A.Sankara Srinivasan is the founder & COO of RealtyCompass , a property search engine with the idea to help user discover all new real estate projects in his city.